The Organisation for Economic Co-operation and Development (OECD) has urged Estonia to abolish the 10-year waiting period for individuals seeking to rejoin the country’s second pension pillar after leaving the scheme.

In its Economic Survey of Estonia 2026, the OECD welcomed government plans to reduce the waiting period to five years and introduce partial withdrawals, arguing that well-defined conditions are needed to encourage long-term retirement saving.

The recommendation follows reforms introduced in 2021 that gave savers full access to their second-pillar pension assets. Since then, around one-third of contributors have withdrawn their savings, equivalent to 4.6 per cent of pre-reform GDP.

To discourage withdrawals, those who exit the system are currently barred from rejoining for 10 years. The OECD said a revised framework should include conditions for making up missed contribution years and ensure withdrawals are linked to clearly defined life events.

“A well-designed framework, that would include conditions of how to make up for the ‘missed’ contribution years, is needed," the report stated.

Last year, Estonian pension provider Luminor also called for the 10-year wait to be scrapped, after its research showed that a third of citizens would like to rejoin the pension system.

The OECD also called for a review of the favourable tax treatment of third-pillar pension withdrawals.

The report highlighted wider concerns about pension adequacy in Estonia, noting that the net pension replacement rate was 38 per cent in 2024 for an average earner — the lowest in the OECD.

In 2025, the average pension stood at €817 per month, around 40 per cent of the average wage.

While voluntary private savings play a growing role, the OECD warned they may not be sufficient to offset falling public provision.

It projected that the first-pillar replacement rate will decline from 49 per cent to 31 per cent by 2070, while funded schemes will add around 13 percentage points, resulting in a total replacement rate of 44 per cent.

It added that maintaining a 70 per cent income replacement rate would require additional third-pillar contributions of around 5 per cent of gross earnings.

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